Home insurance in India: the Bharat Griha Raksha policy

The rule

The IRDAI guidelines of 4 January 2021 (Ref. IRDA/NL/GDL/MISC/004/01/2021) introduced Bharat Griha Raksha to replace the old Standard Fire and Special Perils policy for dwellings. As written:

• it “shall be mandatorily offered by all general insurers carrying on the business of Fire and Allied Perils insurance, for all new risks as well as renewals with effect from 1st April, 2021” (para. 3.4); insurers put their own name in front of the product name;
• the standard proposal form, prospectus, policy wordings, key features document and agreed bank clause “shall be adopted by all insurers”, and “No insurer shall change or alter any part of the wordings” (paras. 3.7 and 3.8);
• it covers “Home Building and/or Home Contents in India” (para. 4);
• the duration “shall not be more than 10 years” (para. 8).

The IRDAI’s standard products page still lists them; Payotte found no later circular replacing them.

What is covered

The standard policy wording (Clause B) covers physical loss, damage or destruction caused by these insured events:

Built-in covers (para. 9): loss of rent and rent for alternative accommodation (for a tenant, the extra rent), removal of debris, and architect’s, surveyor’s and engineer’s fees. Loss of rent runs for the repair time, up to three years, on a certificate that the home is unfit to live in.

Optional covers (para. 10): valuable contents (jewellery, silverware, paintings, art) on an agreed-value basis, and personal accident (death only) for the insured and spouse when an insured event causes it, for ₹5 lakh per person (para. 12.3).

What is not covered

The general exclusions (Clause F) include deliberate acts, war, nuclear risks, short-circuit damage to the appliance itself, bullion, cash, documents and vehicles, items that simply go missing, consequential loss, and an extension adding more than 10% of carpet area that was not declared and endorsed.

Ordinary burglary, unconnected with an insured event, is not among the insured events of the basic wording. Insurers may file their own add-ons (para. 14.2): ask whether one covers it.

How the sum insured works

• Building: on reinstatement value. The insurer records the carpet area and a cost of construction per unit of carpet area; the sum insured “can be higher than the defined cost of construction … multiplied by carpet area but NOT lower” (para. 12.1). See carpet area vs built-up area.
• Automatic escalation: on a long-term policy, the building sum insured rises by 10% a year of the starting amount, up to 100% more, without extra premium. The IRDAI’s example: ₹10 lakh grows to ₹11 lakh after one year, ₹12 lakh after two, to a maximum of ₹20 lakh (para. 12.4). On an annual policy it rises daily by 1/365th of 10% (para. 12.5).
• General contents: automatically 20% of the building sum insured, capped at ₹10 lakh, unless you opt out or declare more (para. 12.6).
• Valuables: a valuation certificate is needed unless the sum insured is up to ₹5 lakh and no item exceeds ₹1 lakh (para. 12.2).
• No underinsurance: Clause I says that if the sum insured is less than the actual value at risk, “the difference will not affect the amount We pay”. Carpet area is treated differently: if the actual area is smaller than the area you declared, the claim is calculated on the actual area. The prospectus example: 120 sq m declared instead of 100 sq m at ₹15,000 per sq m, insured for ₹18,00,000; after a total loss the insurer pays ₹15,00,000.

Step by step: making a claim

1. Keep damaged items and do not repair (except urgently) until the insurer has inspected.
2. Report to the authorities: fire brigade and police for fire, explosion or lightning; the District Administration for subsidence or landslide; the police for impact, riot, terrorism or theft.
3. Submit the claim form “at the earliest opportunity, but within 30 days” from when you first notice the loss, and declare any other policy covering the same loss.
4. The wording says the insurer is not liable after 12 months from the loss unless the claim is in pending action or arbitration.

If the home is mortgaged

The standard documents include an “Agreed Bank Clause”: when the home is mortgaged and the bank is named in the schedule, the insurer pays “the entire amount” due under the policy to the bank, and that payment discharges the insurer. The IRDAI documents Payotte read do not say whether a lender may require you to buy home insurance, or from which insurer: read your loan sanction letter, and see home loan eligibility and EMI.

Which professional to consult

An insurer or licensed intermediary for the quote; an architect to estimate reconstruction cost and, after a loss, certify that the home is unfit to live in. This guide is not insurance advice.